That is the goal. Justine has an article up providing details on the latest testing. See: OpenSimulator Load Test 5 Report. The current tests are up to 400 avatars, which I think is pretty awesome.
It seems the new Bullet Physics is much more efficient than ODE. But, it is currently running as a single thread. This means that when they see frames rates dropping it isn’t from CPU overload. The bottleneck is in the Bullet Engine. Changing to multi-threaded would use more of the CPU and help keep frame rates up. But, changing to multi-threaded is a significant task and will be handled somewhere in the future.
They do load testing on Tuesdays. They need more human testers. Testing happens on the Conference Grid.